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The relationship between the inflation rate and the unemployment rate in Poland and their long-term associations with selected macroeconomic variables

Author

Listed:
  • Jan Koterwa

    (AGH University of Krakow, Krakow, Poland)

  • Hubert Kycia

    (AGH University of Krakow, Krakow, Poland)

  • Anna Czapkiewicz

    (AGH University of Krakow, Krakow, Poland)

Abstract

The purpose of this paper is to examine the relationship between the inflation and unemployment rates in Poland and to analyze their long-term relationships with selected macroeconomic variables: the WIG20 index, consisting of the 20 largest Polish companies noted on Warsaw Stock Exchange, the USD/PLN exchange rate, the Brent crude oil index, and the interest rate on 10-year government bond yields. The main objective of the study is to determine the relationship between inflation and unemployment. In this study, a vector error correction model (VECM) was used to study long-run dependence. The impulse response function and forecast error variance decomposition were also used to examine the interactions between variables. There is one long-run relationship between the factors studied. Both the values of the VECM model parameters and the results of the impulse response function indicate that there is a negative relationship between inflation and unemployment in the short term. In the long term, there is a positive relationship, resulting in the stagflation phenomenon.

Suggested Citation

  • Jan Koterwa & Hubert Kycia & Anna Czapkiewicz, 2023. "The relationship between the inflation rate and the unemployment rate in Poland and their long-term associations with selected macroeconomic variables," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 24(2), pages 165-185.
    • Handle: RePEc:agh:journl:v:24:y:2023:i:2:p:165-185
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